September 2012
Capital gains: Long term/short term: S/s 2(42A), 10(38) and 54EC: A. Y. 2006-07: Period of holding : If an assessee acquires an asset on 2nd January in the preceding year, the period of 12 months would be complete on 1st January, next year and not on 2nd January: If it is sold on 2nd January and if the proviso to section 2(42A) applies, it would be treated as a long term capital gain.
By K. B. Bhujle, Advocate
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[Bharti Gupta Ramola v. CIT; 252 CTR 139 (Del.)]
The assessee had sold two mutual fund instruments on 29/09/2005 and 14/10/2005 which were purchased on 29/09/2004 and 14/10/2004 respectively. In the return of income for the A. Y. 2006-07, the assessee claimed that the capital gain on such sales were long term capital gains and had claimed exemption u/s 10(38) and section 54EC as the case may be. The Assessing Officer treated the two capital gains as short term capital gains on the ground that the instruments had not been held for a period of more than 12 months immediately preceding the date of transfer and accordingly disallowed the claim for exemption. The Tribunal allowed the assessee’s claim.
On appeal by the Revenue, the Delhi High Court upheld the decision of the Tribunal and held as under:
“If an assessee acquires an asset on 2nd January in a preceding year, the period of 12 months would be complete on 1st January, next year and not on 2nd January. If it is sold on 2nd January and if the proviso to section 2(42A) applies, it would be treated as long term capital gain.”
